Have you been stung by exorbitant bank charges after going just a few pounds into the red? You're not alone - banks rake in an estimated £3bn a year from fees such as £38 for a bounced cheque and £25 each day an account is over its authorised limit. But do you really have to pay these charges?

Take the case of Dave Smith. He fought charges just short of £1,500 imposed by Abbey National - and the bank settled almost at the door of the court. Abbey wanted to keep the payout quiet - it asked Mr Smith for a confidentiality agreement, but he refused. Can you repeat Mr Smith's success? The evidence is, persistence pays.

According to bankchargeshell.co.uk a website devoted to the fightback against penalty charges, consumers have won overdraft charge fights against banks such as Alliance & Leicester, Yorkshire Bank, Intelligent Finance and LloydsTSB. RBS and Halifax have paid up on credit card claims.

Customers have to be prepared to fight, often for months. But banks appear reluctant to test the legality of their penalties in the legal arena, usually settling in full just before the case is due for hearing.

Many individuals have threatened legal action against the banks after Guardian Money's Richard Colbey, a barrister, first exposed in October 2004 that the legal foundation for credit card penalties was built on sand.

The crux of the argument is that banks have no rights under law to impose penalties on customers in excess of the underlying cost of the overdraft or handling a bounced cheque.

Brian Egerton of Truro, Cornwall, is one of the prime movers behind the site. He says: "Banks are blatantly overcharging and their legal departments must know this.

"We have bombarded the Office of Fair Trading with chapter and verse on how the banks pay up when threatened with legal action. Banks apply charges that are, admittedly, written into contracts with their customers, but these, we believe are unenforcable under common law."

The OFT has begun an investigation into what it calls "disproportionately high" default charges on credit cards -typically a £25 penalty for missing a payment - and the credit card companies are fighting it tooth and nail.

If the OFT orders the credit card companies to cut late payment charges, it is almost inevitable that banks will be forced to cut excessive overdraft and bounced cheque fees.

The banks claim their fees are "a reflection of their costs", even though critics say they are automatically generated, often with no warning.

Other banks say the charges are important for customer discipline. Nationwide says: "Part of the fees are a disincentive, a discouragement against unauthorised borrowing."

But the OFT has warned banks that it believes default penalties are unfair if they "cause a significant imbalance in the rights of the parties to the detriment of the consumer."

The OFT says its investigation will take "as long as it needs" as there is no statutory time limit.

In the meantime, here are some legal cases from bankchargeshell.co.uk to cite when arguing against penalties.

Wilson v Love (1896) - established that a charge was a penalty if it did not relate to the true cost of an item.

Dunlop Pneumatic Tyre v New Garage and Motor (1915) - described a penalty as "greater than the greatest loss that could be suffered from the breach of contract." Charges should not be "extravagant and unconscionable".

Bridge v Campbell Discount (1962) - court held sums payable under a contract to cancel a hire purchase deal were excessive and unenforcable.

Murray v Leisureplay (2004) - court decided Mr Murray's contract, which promised three years' severance pay, was a "penalty clause" which could not be enforced.

"These charges hit the most vulnerable including those with physical or mental disabilities and those on fixed incomes.

"They are plunged into deep despair," says John Wood at Citizens Advice in St Austell, Cornwall. "Once these penalties start to bite, it is often very tough to get back into the black. Banks don't listen until we threaten to go to court."